SEC issues record $114-million whistleblower award

KR Srivats New Delhi | Updated on October 26, 2020

The US Securities and Exchange Commission (SEC) has issued an award of over $114 million to a whistleblower whose information and assistance led to the successful enforcement of SEC and related actions.

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The $114-million award consists of an approximately $52-million award in connection with an SEC case and an approximately $62-million award arising out of the related actions by another agency.

The award marks the highest in the programme’s history, and eclipses the next highest award of $50 million made to an individual in June 2020.

“This milestone award is a testament to the Commission’s commitment to award whistleblowers who provide the agency with high quality information,” said SEC Chairman Jay Clayton. “Whistleblowers make important contributions to the enforcement of securities laws and we are committed to getting more money to whistleblowers as quickly and as efficiently as possible.”

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After repeatedly reporting concerns internally, and despite personal and professional hardships, the whistleblower alerted the SEC and the other agency of the wrongdoing and provided substantial, ongoing assistance that proved critical to the success of the actions., said Jane Norberg, Chief of the SEC’s Office of the Whistleblower.

Investor protection fund

Since issuing its first award in 2012, the SEC has awarded approximately $676 million to 108 individuals. All payments are made out of an investor protection fund established by the Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards.

Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action. The awards can range from 10 per cent to 30 per cent of the money collected when the monetary sanctions exceed $1 million.

As set forth in the Dodd-Frank Act, the SEC protects the confidentiality of whistleblowers and does not disclose information that could reveal his/her identity.

India situation

In India, market regulator SEBI had in December 2019 formally introduced regulations on whistleblower 's conduct and protection under its Insider Trading regulations. The efficacy of the SEBI effort which included externalising the procedure of reporting (directly to SEBI instead of approaching the company) by the informant so that their anonymity is ensured is yet to be proven, say capital market observers. The judicial system in India not being fast enough in concluding the trial is one another handicap in ensuring fair and trustworthy whistleblower program like the US, experts added.

Published on October 26, 2020

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